McPadden v. Sidhu
Delaware Court of Chancery
964 A.2d 1262 (Del. Ch. 2008)
The board of directors (defendants) of i2 Technologies, Inc. approved selling its subsidiary TSC to i2's own management, led by officer Anthony Dubreville (defendant), for $3 million, even though the board knew Dubreville had a personal interest in the deal, controlled the sale process with little oversight, made little effort to solicit competing offers, and relied on valuations built on his own management's projections; two years later Dubreville resold TSC for over $25 million. Shareholder McPadden (plaintiff) sued the directors and Dubreville for breach of fiduciary duty, and the defendants moved to dismiss, invoking i2's certificate-of-incorporation exculpatory provision that limits directors' personal liability for certain conduct.
Whether an exculpatory provision in a corporation's articles of incorporation shields directors from personal liability when the directors acted in gross negligence but not in conscious disregard of their responsibilities.